Fraud – the most common scams and how to avoid being fleeced

The last thing one thinks about when buying or renting a home is being scammed but unfortunately fraud has become very prevalent in the industry and it’s essential that all parties remain vigilant throughout the process.

Scams are also becoming increasingly sophisticated and fraudsters are not only duping buyers, sellers and prospective tenants, but also property practitioners.

In fact, scams involving the interception of communication between attorneys, agents and clients, has become so prevalent that the Attorneys Indemnity Insurance Fund no longer coverers attorneys who fall victim.

And the rise of digital fraud has prompted financial institutions to urge both clients and property professionals to be extra vigilant and ensure they verify all credentials.

Sales market

There are a number of audacious tricks to look out for, including those run by syndicates whose members convincingly pose as estate agents, sellers and registered attorneys.

One scam is to sell homes that are not actually even up for sale and they usually occur when the conveyancer involved is negligent in identifying and authenticating the identity of the seller.

In order to transfer the title of a property you need an original title deed and a special power of attorney from the owner authorising the conveyancer to make the transfer, so the syndicate member poses as the owner and the property is transferred and proceeds paid without the seller even being aware that the property has been sold.

Another method is when a fraudster sends a phishing-type email aimed at intercepting email correspondence to one of the parties and then monitors the progress of the transaction. Then, when payment is about to happen, they send an email from an almost identical email address notifying the purchaser or conveyancer of a change in bank details.

And, if successful, this scam has serious ramifications which aren’t easily fixed. If the purchaser is duped into paying money into a fraudulent account, chances are they will not have enough left to financially perform in terms of the agreement of sale and will find themselves in breach of contract and liable for damages to the seller.

So not only do they lose their money, don’t get the house and they have to pay an additional fee in damages. And, unfortunately, loss due to fraud is not a viable excuse in this situation because neither the seller nor conveyancer were at fault. Similarly, if conveyancers get duped into paying the fraudster, they are also liable.”

Scammers might also identify homes that are legitimately for sale and then post an advert on sites such as Gumtree where it’s not being marketed. One of the syndicate members then poses as an estate agent and takes an unsuspecting buyer for viewing and when they decide to buy, they’re taken to the ‘agent’s’ lawyer to sign a sale agreement.

The buyer then transfers the money into the “seller's” bank account after which the money is immediately transferred to various other accounts and withdrawn.

In order to protect themselves, professionals as well as buyers and sellers should heed the following advice:

1. Know your clients and always personally verify any change in payment instruction;

2. Be especially careful if bank details are changed and always independently verify the bank account details directly with the bank;

3. Do not pay into an account that does not belong to someone already verified as a party to the transaction;

4. Confirm that your agent is certified and if you have doubts, you can also verify an agent on the Estate Agency Affairs Board website where all must be registered.

5. In order to avoid replying to a fake email, don’t ever just click reply to an email when you are sending important information, rather create a new email and add the address from your outlook address book;

6. Buyers and sellers should always ask for verification of the bank account into which they will be paying funds;

7. View any emails requesting a change of banking details with suspicion and never use banking details provided in an email, unless you have confirmed their authenticity;

8. Face-to-face meetings aren’t always practical however, important documents should always be signed in person and after verification of bank details has been completed;

9. Have adequate insurance.

Rental market

One of the most convincing scams is one where both the property owner and prospective tenant are scammed.

The scammer poses as the buyer of a property and signs an offer to purchase which gives the fraudulent buyer some right of access or occupation of the property. The fraudster then signs a lease with an unsuspecting tenant and after paying a deposit of one or two-months’ rental and the first month’s rent in advance, the conman disappears with the money.

The fraudster then obviously defaults on the sales agreement and the owner realises that there is an innocent but unlawful person occupying the property. And if an agreement can’t be reached, the unsuspecting tenant will have lost their money, have nowhere to live and face eviction proceedings from the owner.

The following steps will buffer you against being scammed:

1. In most cases, owner’s details are of public record and recorded at the Deeds Registry, so before paying over any money, if you have any doubts at all, check the records and then ask the owner for proof of ownership and identification.

2. It is also important to sign a lease with the owner of the property and no-one else as any other arrangement is very risky and is only as strong as the other party’s rights against the owner.

3. Use a reputable estate agency. They are legally obliged to FICA, they have facilities to easily verify ownership, and they will hold the deposit in their trust account and usually manage the collection of tenant’s money in accordance with the Rental Housing Act. Reputable estate agents also have indemnity insurance if they too fall victim to such a scam.

Whether you are paying bond instalments or monthly rental, property usually accounts for the bulk of our monthly spend and is often the largest investment any of us make, so never let your guard down.

Don’t be too embarrassed to ask for confirmation or verification and follow your gut instinct if you feel uneasy about any aspect of the transaction.